Australian manufacturing contracted in December but US/UK continue growth

Posted on 6 Jan 2015 by Tim Brown

The Australian Performance of Manufacturing Index (Australian PMI) fell by 3.2 points to 46.9 in December, back below the 50-point level which signifies a contraction.

Only two of the seven activity sub-indexes – those for employment (up 4.7 points to 52.5) and exports (up 2.9 points to 51.0) – were above 50 points this month.

The new orders sub-index fell sharply (down 10.6 points to 43.7) following two months of mild expansion, reflecting slower growth or a decline in new orders across the manufacturing sub-sectors. Manufacturing production also contracted for a second month (down 1.4 points to 46.0). Reflecting the weak trading conditions, supplier deliveries (down 3.5 points 48.5) and stocks (almost unchanged at 45.4) also contracted in December.

Australian PMI December 2014 graph - image courtesy of the Australian Industry Group
Australian PMI December 2014 graph – image courtesy of the Australian Industry Group


The Australian PMI has not fully recovered since 2009 and has erratically experienced monthly peaks and troughs over the last 6 years.

Despite the contraction, as in November, four of the eight manufacturing sub-sectors did expand in December. The large food, beverages & tobacco sub-sector continued to expand (up 1.3 points to 60.4), as did the smaller wood & paper products sub-sector – but at a much slower rate, dropping 10.5 points to 51.1. The textiles, clothing & furniture (up 4.2 points to 58.6) and non-metallic mineral products (up 12.4 points to 62.6) sub-sectors also expanded for a second consecutive month.

The UK and China PMI data also demonstrated a slowing but the UK still returned a positive result of 57.6 in December from 59.4 in November. By comparison, the HSBC China Manufacturing PMI fell to 49.6 in the final reading for December, down from 50.0 in November, with a decline in domestic demand believed to be responsible for the slowdown of the Asian powerhouse as new orders contracted for the first time since April 2014

December data signalled a further solid expansion of US manufacturing production, alongside rising levels of employment and incoming new business. However, the final seasonally adjusted Markit US Manufacturing Purchasing Managers’ Index (PMI) fell from 54.8 in November to 53.9 in December.

Levels of new work continued to increase in December and the rate of expansion picked up slightly from the 10-month low recorded during November. A number of manufacturers noted weak demand from the euro area and emerging markets, which contrasted with relatively strong spending patterns among domestic clients.

US manufacturing payroll numbers rose for the eighteenth successive month in December.  However, the rate of job creation moderated to its least marked since July.  Stocks of finished goods were depleted in December, thereby ending a five-month period of  rising post-production inventory levels.